ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2018

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-33093

LIGAND PHARMACEUTICALS INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware

77-0160744

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

3911 Sorrento Valley Boulevard, Suite 110

San Diego, CA

92121

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (858) 550-7500

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Stock, par value $.001 per share

The Nasdaq Global Market of The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x

Accelerated Filer o

Non-accelerated Filer o

Smaller reporting company o

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the Registrant’s voting and non-voting stock held by non-affiliates was approximately $3.6 billion based on the last sales price of the Registrant’s Common Stock on the Nasdaq Global Market of the Nasdaq Stock Market LLC on June 29, 2018. For purposes of this calculation, shares of Common Stock held by directors, officers and 10% stockholders known to the Registrant have been deemed to be owned by affiliates which should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant or that such person is controlled by or under common control with the Registrant.

As of February 25, 2019, the Registrant had 20,445,407 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant’s 2019 Annual Meeting of Stockholders to be filed with the Commission within 120 days of December 31, 2018 are incorporated by reference in Part III of this Annual Report on Form 10-K. With the exception of those portions that are specifically incorporated by reference in this Annual Report on Form 10-K, such Proxy Statement shall not be deemed filed as part of this Report or incorporated by reference herein.

Amended and Restated Interest Purchase Agreement, dated May 31, 2017, between the Company and CorMatrix Cardiovascular, Inc.

Aldeyra

Aldeyra Therapeutics, Inc.

AMD

Age-related macular degeneration

Amgen

Amgen, Inc.

ANDA

Abbreviated New Drug Application

API

Active pharmaceutical ingredient

Apricus

Apricus Biosciences, Inc.

Aptevo

Aptevo Therapeutics

Arcus

Arcus Biosciences, Inc.

ASC

Accounting Standards Codification

ASCO

American Society of Clinical Oncology

ASCT

Autologous Stem Cell Transplantation

ASH

American Society of Hematology

ASU

Accounting Standards Update

Aziyo

Aziyo Med, LLC

Azure

Azure Biotech, Inc.

Baxter

Baxter International, Inc.

BiTE

Bispecific T cell engager

BMS

Bristol Myers Squibb

C-Stone

CStone Pharmaceuticals Co., Ltd.

CASI

CASI Pharmaceuticals, Inc.

Cardioxyl

Cardioxyl Pharmaceuticals, Inc.

Code of Conduct

Code of Conduct and Ethics Policy

Coherus

Coherus Biosciences, Inc.

CoM

Composition of Matter

Company

Ligand Pharmaceuticals Incorporated, including subsidiaries

Convertible Note

Senior Convertible Promissory Note

COPD

Chronic obstructive pulmonary disease

Cormatrix

Cormatrix Cardiovascular Inc.

Cormatrix Asset Sale

Asset sale from CorMatrix to Aziyo

Corvus

Corvus Pharmaceuticals, Inc.

COSO

Committee of Sponsoring Organizations of the Treadway Commission

CRO

Contract Research Organization

Crystal

Crystal Bioscience, Inc.

CStone

CStone Pharmaceuticals

CURx

CURx Pharmaceuticals, Inc.

CVR

Contingent value right

CyDex

CyDex Pharmaceuticals, Inc.

Daiichi Sankyo

Daiichi Sankyo Company, LTD

Dianomi

Dianomi Therapeutics

DMF

Drug Master File

Eisai

Eisai Inc.

Eli Lilly

Eli Lilly and Company

EMC

Extracellular matrix

EPOR

Erythropoietin receptor

ESPP

Employee Stock Purchase Plan, as amended and restated

EU

European Union

Exelixis

Exelixis, Inc.

FASB

Financial Accounting Standards Board

FDA

Food and Drug Administration

Fred Hutch

The Fred Hutchinson Cancer Research Center

FSGS

Focal segmental glomerulosclerosis

GAAP

Generally accepted accounting principles in the United States

GCSF

Granulocyte-colony stimulating factor

GRA

Glucagon receptor antagonist

HanAll

HanAll Biopharma Co., Ltd.

Harbour

Harbour BioMed

HCO

Heavy-chain-only

HNO

Nitroxyl

Hovione

Hovione FarmCiencia

IPR&D

In-Process Research and Development

IRAK4

Interleukin-1 Receptor Associated Kinase-4

IRS

Internal Revenue Service

ITP

Chronic immune (idiopathic) thrombocytopenic purpura

IV

Intravenous

iMBP

iMetabolic Biopharma Corporation

Immunovant

Immunovant Sciences GmbH

IND

Investigational New Drug

Original Interest Purchase Agreement

Interest Purchase Agreement, dated May 3, 2016, between the Company and CorMatrix Cardiovascular, Inc.

KSQ Therapeutics

KSQ Therapeutics, Inc.

Ligand

Ligand Pharmaceuticals Incorporated, including subsidiaries

Loan and Security Agreement

Loan and Security Agreement, dated May 21, 2014, between the Company and Viking, as amended by the First Amendment to Loan and Security Agreement, dated April 8, 2015, and the Second Amendment to Loan and Security Agreement, dated January 22, 2016

LTP

Liver-targeted prodrug

Lundbeck

Lundbeck A/S

Marinus

Marinus Pharmaceuticals, Inc.

MCM

Mineral Coated Microparticle

MDS

Myelodysplastic syndromes

Melinta

Melinta Therapeutics, Inc.

Merck

Merck & Co., Inc.

Merrimack

Merrimack Pharmaceuticals, Inc.

Metabasis

Metabasis Therapeutics, Inc.

Metavant

Metavant Sciences

MLA

Master License Agreement

MRSA

Methicillin-resistant Staphylococcus aureu

NASH

Non-alcoholic steatohepatitis

NDA

New Drug Application

NOLs

Net Operating Losses

Novartis

Novartis AG

OMT

Open Monoclonal Technology, Inc.

Omthera

Omthera Pharmaceuticals, Inc.

Ono

Ono Pharmaceutical Co., Ltd.

Orange Book

Publication identifying drug products approved by the FDA based on safety and effectiveness

The Platform License Agreement, dated March 23, 2015, by and between Ligand and WuXi, as amended

X-ALD

X-linked adrenoleukodystrophy

Zydus Cadila

Zydus Cadila Healthcare Ltd

PART I

Cautionary Note Regarding Forward-Looking Statements:

You should read the following report together with the more detailed information regarding our company, our common stock and our financial statements and notes to those statements appearing elsewhere in this document.

This report contains forward-looking statements that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “plan,” “intends,” “estimates,” “would,” “continue,” “seeks,” “pro forma,” or “anticipates,” or other similar words (including their use in the negative), or by discussions of future matters such as those related to our future results of operations and financial position, royalties and milestones under license agreements, Capitsol material sales, product development, and product regulatory filings and approvals, and the timing thereof, as well as other statements that are not historical. You should be aware that the occurrence of any of the events discussed under the caption “Risk Factors” could negatively affect our results of operations and financial condition and the trading price of our stock.

The cautionary statements made in this report are intended to be applicable to all related forward-looking statements wherever they may appear in this report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we assume no obligation to update our forward-looking statements, even if new information becomes available in the future. This caution is made under the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended.

Information regarding partnered products and programs comes from information publicly released by our partners and licensees.

Trademarks

Our trademarks, trade names and service marks referenced herein include Ligand®, Captisol®, Captisol-enabled™, LTP technology™, OmniAb®, OmniMouse®, OmniRat®, OmniFlic® and OmniChickenTM which are protected under applicable intellectual property laws and are our property. All other trademarks, trade names and service marks including BaxdelaTM, CarnexivTM, Conbriza®, Duavee®, Evomela®,Kyprolis®, Promacta®, Revolade®, SUREtechnology Platform™, Viviant®, Vivitra®, Bryxta®, and Exemptia® are the property of their respective owners. Solely for convenience, trademarks, trade names and service marks referred to in this report may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to such trademarks, trade names and service marks. Use or display by us of other parties’ trademarks, trade dress or products is not intended to and does not imply a relationship with, or endorsement or sponsorship of, us by the trademark or trade dress owners.

Item 1.

Business

Overview

We are a biopharmaceutical company focused on developing and acquiring technologies that help pharmaceutical companies discover and develop medicines. Over our more than 30 year history, we have employed research technologies such as nuclear receptor assays, high throughput computer screening, formulation science, liver targeted pro-drug technologies and antibody discovery technologies to assist companies in their work toward securing prescription drug approvals. We currently have partnerships and license agreements with over 110 pharmaceutical and biotechnology companies. Over 200 different programs under license with us are currently in various stages of commercialization and development. We have contributed novel research and technologies for approved medicines that treat cancer, osteoporosis, fungal infections and low blood platelets, among others. Our partners have programs currently in clinical development targeting seizure, coma, cancer, diabetes, cardiovascular disease, muscle wasting, liver disease, and kidney disease, among others. We have over 1,200 issued patents worldwide.

We have assembled our large portfolio of fully-funded programs either by licensing our own proprietary drug development programs, licensing our platform technologies such as Captisol or OmniAb to partners for use with their proprietary programs, or acquiring existing partnered programs from other companies. Fully-funded programs, which we refer to as "shots on goal," are those for which our partners pay all of the development and commercialization costs. For our internal programs, we generally plan to advance drug candidates through early-stage drug development or clinical proof-of-concept and then seek partners to continue development and potential commercialization.

Our business model creates value for stockholders by providing a diversified portfolio of biotech and pharmaceutical product revenue streams that are supported by an efficient and low corporate cost structure. Our goal is to offer investors an opportunity to participate in the promise of the biotech industry in a profitable, diversified and lower-risk business than a typical biotech company. Our business model is based on doing what we do best: drug discovery, early-stage drug development, product reformulation and partnering. We partner with other pharmaceutical companies to leverage what they do best (late-stage development, regulatory management and commercialization) to ultimately generate our revenue. We believe that focusing on discovery and early-stage drug development while benefiting from our partners’ development and commercialization expertise will reduce our internal expenses and allow us to have a larger number of drug candidates progress to later stages of drug development.

Our revenue consists of three primary elements: royalties from commercialized products, license and milestone payments and sale of Captisol material. In addition to discovering and developing our own proprietary drugs, we selectively pursue acquisitions to bring in new assets, pipelines, and technologies to aid in generating additional potential new revenue streams.

2018 and Recent Major Business Highlights

Acquisitions and Other Business Development

•In October 2018, we acquired Vernalis, a structure-based drug discovery biotechnology company with a broad pipeline of partnered programs and ongoing collaborations for $43 million in cash. The acquisition of Vernalis provided us with more than eight fully-funded shots on goal, a 70-person research and development team based in Cambridge, England working on a portfolio of collaborations that have the potential to create additional shots on goal, a compound library of unpartnered programs for potential development and out-licensing, and England-based operations that provide a platform to help efficiently pursue investment and acquisition activities in Europe and the United Kingdom.

•In December 2018, we announced the acquisition of economic rights to PTX-022 from Palvella for $10 million in cash. We will receive a tiered net sales royalty in the mid-to-upper single digits on any net sales of PTX-022, as well as regulatory and financing milestones. PTX-022 is a novel, orphan-indicated, topical formulation of rapamycin in Phase 2/3 development for the treatment of pachyonychia congenita, a rare skin disorder with no FDA-approved treatment.

•In January 2019, we announced an investment in Dianomi, paying a total of $3 million in exchange for a tiered royalty of 2%-3% based on net sales for the first five products to be approved using Dianomi’s patented MCM technology and a loan convertible into $1 million of equity at Dianomi’s next qualified financing.

•In March 2018, we announced the signing of a license agreement granting Roivant exclusive global rights to develop and commercialize LGD-6972 (now named RVT-1502), the GRA which we developed through a successful Phase 2 clinical trial. Under the terms of the agreement, we received a $20 million upfront license fee, and are eligible to receive up to an additional $528.8 million of milestone payments and tiered royalties ranging from low double digits to the mid-teens, with the top tier applying to annual net sales above $3 billion. Roivant is responsible for all costs related to the program.

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•We expanded the distribution capacity on Captisol. In addition to shipping commercial and clinical material out of our contract manufacturing sites in both Portugal and Ireland last year, we also established a new distribution capability in Ireland in 2018.

Selected Late-Stage Clinical Developments

•Retrophin announced that the first patient was dosed in a global, pivotal Phase 3 clinical trial evaluating the long-term nephroprotective potential of sparsentan for the treatment of IgA nephropathy.

•Retrophin presented new data examining the long-term effects of sparsentan in FSGS at the American Society of Nephrology Kidney Week 2018, and announced that the Journal of the American Society of Nephrology published online the positive results from Retrophin’s Phase 2 DUET study of sparsentan for the treatment of FSGS.

•Retrophin announced that the United States Patent and Trademark Office issued a new patent providing coverage for the use of sparsentan in the treatment of IgAN and broadening the existing coverage to include all doses of sparsentan between 200 and 800 mg/day. The patent has a stated expiration date of March 30, 2030.

•Melinta Therapeutics announced positive topline results from its Phase 3 trial of Baxdela™ for the treatment of adult patients with community-acquired bacterial pneumonia.

•Viking presented positive results from a 12-week Phase 2 study of VK2809 in patients with non-alcoholic fatty liver disease in an oral late-breaker presentation at the AASLD’s annual meeting in San Francisco, CA.

•Viking presented positive results from its Phase 2 study of VK5211 in patients recovering from hip fracture at the American Society for Bone and Mineral Research 2018 annual meeting.

•Aldeyra announced enrollment of the first patient in a Phase 3 clinical trial of topical ocular reproxalap for the treatment of allergic conjunctivitis.

•Aldeyra also announced that the last patient has been dosed in a Phase 2b clinical trial of topical ocular reproxalap in dry eye disease.

•Sermonix announced FDA acceptance of its IND application and the initiation of a 100-patient Phase 2 trial of oral lasofoxifene for the treatment of metastatic breast cancer. Sermonix also announced the presentation of three posters for oral lasofoxifene in metastatic breast cancer at the 2018 San Antonio Breast Cancer Symposium.

•Verona announced enrollment of the last patient in its Phase 2 clinical trial evaluating the effect of nebulized ensifentrine (RPL554) as an add-on to dual therapy using long-acting anti-muscarinic / long-acting beta2-agonists and triple therapy in the maintenance treatment of patients with moderate to severe COPD.

•Verona announced initiation of a Phase 2 clinical trial to evaluate the pharmacokinetic profile, efficacy and safety of a dry powder inhaler formulation of ensifentrine in patients with moderate-to-severe COPD.

•Merrimack announced a poster presentation related to seribantumab at the 2018 ASCO Annual Meeting.

•Opthea reported that the last patient was enrolled in its ongoing Phase 2b trial of OPT-302 for wet age-related macular degeneration.

Selected Regulatory Developments

•Novartis announced that the FDA expanded the label for Promacta (eltrombopag) to include first-line treatment for adults and pediatric patients two years and older with SAA in combination with standard immunosuppressive therapy.

•Novartis announced results of a retrospective, real-world evidence study in patients with ITP treated with Promacta/Revolade (eltrombopag), compared with other second-line therapies, demonstrating that patients experienced better clinical outcomes with Promacta in terms of fewer bleeding episodes.

•On October 1, 2018, Amgen announced that the FDA approved the supplemental NDA to expand the prescribing information for Kyprolis to include a once-weekly dosing option in combination with dexamethasone for patients with relapsed or refractory multiple myeloma.

•CASI Pharmaceuticals announced that it received National Medical Products Administration (formerly, the China FDA) approval of EVOMELA for use as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with multiple myeloma, and the palliative treatment of patients with multiple myeloma for whom oral therapy is not appropriate.

•Daiichi Sankyo announced receipt of marketing approval in Japan for MINNEBRO (esaxerenone) for the treatment of hypertension.

•SAGE announced that the FDA Psychopharmacologic Drugs Advisory Committee and Drug Safety and Risk Management Advisory Committee jointly voted that data support the favorable benefit-risk profile of Zulresso injection for the treatment of postpartum depression. SAGE also announced on November 20, 2018 that the PDUFA action date for the NDA for ZULRESSO is March 19, 2019.

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Disclosed Licensing Deals Entered into or Expanded

OmniAb Technology

•We announced receipt of a $47 million payment as a result of signing an amendment related to our OmniAb platform license agreement with WuXi. Under the amended agreement, we will continue to be eligible to earn royalties at the same rate and terms as the previous agreement and the predefined contract payments have been eliminated. With this new business relationship, WuXi believes it will be able to increase the number of OmniAb antibodies it discovers for its clients in China and around the world.

•Worldwide license agreements with venBio Partners, Ferring Pharmaceuticals and Glenmark Pharmaceuticals to use the OmniAb platform technologies to discover fully human antibodies. The agreement with venBio permits the venture capital firm’s portfolio companies to enter into worldwide OmniAb platform agreements under previously agreed-upon terms. We are eligible to receive annual access payments, milestone payments and royalties on future net sales of any antibodies discovered under these licenses.

•We entered into OmniChicken license expansions with FivePrime and Amgen, allowing the companies to use the OmniChicken technology.

•Worldwide license agreement with iMBP to use the OmniAb platform technologies to discover fully human antibodies. iMBP is an early-stage company with experienced leadership and proprietary research based on functional preservation of key natural enzymes responsible for lipid metabolism. Their discovery-stage programs target obesity and related diseases, with a primary focus on hyperlipidemia. We are eligible to receive a tiered royalty on future sales of up to 6%. As part of the agreement, we will fund and facilitate select early antibody discovery activities, and in return will receive an equity ownership position in iMBP.

•OmniAb platform license agreement with Fred Hutch to use the OmniAb rodent platform technologies to discover fully human antibodies. We are eligible to receive a defined share of revenue received by Fred Hutch from companies that commercialize products incorporating any such OmniAb-derived antibody.

•Research and development agreement with Janssen Pharmaceuticals for the development by Ligand of a HCO version of OmniChicken, for which we are eligible to earn defined milestone payments. Upon completion of the project, we will be able to make the HCO OmniChicken available to other commercial partners.

•CStone announced two pivotal Phase 2 studies exploring the efficacy and safety of OmniAb-derived CS1001 in patients with natural killer cell/T-cell lymphoma and classical Hodgkin's lymphoma have been initiated and have each enrolled and dosed the first patient.

•CStone announced a collaboration agreement with Blueprint Medicines to initiate a proof-of-concept clinical trial in China evaluating BLU-554 in combination with OmniAb-derived CS1001.

•CStone also announced the completion of a $260 million series B financing that will primarily fund clinical development of OmniAb-derived CS1001.

•Aptevo announced that the first patient was dosed in a Phase 1/1b clinical trial of APVO436, a novel anti-CD123 by anti-CD3 bispecific antibody, which is being developed for the treatment of patients with acute myeloid leukemia and high-grade myelodysplastic syndrome.

•Aptevo presented new data for APVO436 at the AACR 2018 Annual Meeting.

•Corvus announced updated clinical and biomarker data from its ongoing Phase 1/1b study of CPI-444 in patients with treatment-refractory renal cell carcinoma, which demonstrated an overall survival of 88% at more than 20 months follow-up with CPI-444 administered in combination with atezolizumab.

•Corvus announced the publication of results of preclinical studies of CPI-444 demonstrating that it induces dose-dependent antitumor responses as a monotherapy and in combination with anti-PD-1, anti-PD-L1 and anti-CTLA-4 therapies.

•Seelos closed a reverse merger with Apricus Biosciences and is now publicly traded on the Nasdaq Capital Market under the trading symbol “SEEL”. In conjunction with the reverse merger transaction, Seelos raised gross proceeds of $18 million in a private financing.

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•OmniAb-derived RVT-1401 (previously HL 161) have formed the foundation of a new company called Immunovant during 2018.

•Nucorion Pharmaceuticals presented preclinical data for its novel liver-targeting prodrug technology program, CO1010, for the treatment of hepatitis B at the European Association for the Study of the Liver’s International Liver Congress.

•Syros Pharmaceuticals announced new preclinical data on SY-1365, its first-in-class selective CDK7 inhibitor, showing that it inhibits tumor cell growth in HR-positive breast cancer cell lines that are resistant to treatment with CDK4/6 inhibitors and that it has synergistic activity in combination with fulvestrant in these treatment-resistant cells.

•OmniAb partner Arcus announced that abstracts relating to its portfolio were presented at the Society for Immunotherapy of Cancer Annual Meeting.

•Arcus announced that the FDA cleared the IND application for OmniAb-derived AB122 and the company presented a poster on AB122 at the AACR 2018 Annual Meeting.

•Arcus also announced a collaboration agreement with Infinity Pharmaceuticals to evaluate AB122 with IPI549, an immuno-oncology candidate that selectively inhibits PI3K-gamma.

•MEI Pharma announced a poster presentation related to ME-344 at the 2018 ASCO Annual Meeting.

Internal Pipeline Highlights

•We have continued to make progress on our Captisol-enabled (CE) iohexol program, including deepening the preclinical dataset significantly, which is designed to further illustrate the differentiating features of our product. We are in final preparations for making our Clinical Trial Application submission to the health authorities in Canada where our first in-human trial will be run this year. We've manufactured our clinical batches of CE-iohexol and are expecting to initiate the clinical trial this quarter and we plan to have Phase 1 bioavailability data on CE-iohexol in the third quarter of 2019.

•We now have five internal antibody-related programs that we initiated in 2018. The programs are focused on targets for which biology is known, centered in the oncology and inflammation therapy areas.

Technologies

A variety of technology platforms that enable elements of drug discovery or development form the basis of our portfolio of fully-funded shots on goal. Platform technologies or individual drugs discovered by Ligand are related to a broad estate of intellectual property that includes over 1,200 patents issued worldwide.

OmniAb Technologies

Our OmniAb technology includes our OmniRat, OmniMouse, OmniFlic and OmniChicken technology platforms for use in discovering fully human antibodies. The OmniRat, OmniMouse, and OmniFlic platforms consist of genetically-engineered transgenic animals that produce a broadly diversified repertoire of antibodies and enable novel fully-human antibody drug discovery and development by our OmniAb partners. Fully-human OmniAb antibodies provide advantages to our partners in that fully-human antibodies have reduced immunogenicity, streamlined development timelines and costs, and accelerated novel antibody discovery. The OmniChicken platform consists of genetically-engineered transgenic chickens which enable the generation of novel antibodies against targets that are not immunogenic in mammals like mice and rats. Currently, more than 40 partners are utilizing OmniAb animals in their drug discovery and development efforts. We acquired these technologies through the acquisition of OMT in January 2016 and Crystal in October 2017.

Vernalis Design Platform (VDP)

The VDP technology leverages our leadership in structure-guided drug discovery in which protein structure, drug fragment screening and modeling are integrated with medicinal chemistry to enable the rapid discovery of novel drugs. The VDP approach establishes structural information via x-ray crystallography and NMR methods and develops reliable assay systems to test biophysical, functional and cellular properties. The VDP has proven success with highly-challenging pharmaceutical targets and has generated a broad portfolio, with over 5,000 novel drug/target complexes determined and over 400 granted and pending patents. We acquired the VDP technology through our acquisition of Vernalis in October of 2018, and maintain state-of-the-art laboratories in Cambridge, UK.

Captisol Technology

Captisol is our patented, uniquely-modified cyclodextrin that is specifically designed to maximize safety, while improving the solubility, stability and bioavailability of APIs. Captisol can enable faster and more efficient development paths for our partners, given its known regulatory acceptance. We maintain both Type IV and Type V DMFs with the FDA. These DMFs contain manufacturing and safety information relating to Captisol that our licensees can reference when developing

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Captisol-enabled drugs. We also filed a DMF in Japan in 2015. Captisol-enabled drugs are marketed in more than 60 countries, and over 40 partners have Captisol-enabled drugs in development.

LTP Technology Platform

The LTP Technology platform is a novel prodrug technology designed to selectively deliver a broad range of pharmaceutical agents to the liver. A prodrug is a biologically inactive compound that can be metabolized in the body to produce an active drug. The LTP Technology works by chemically modifying biologically active molecules into an inactive prodrug, which will be administered to a patient and later activated by specific enzymes in the liver. The technology can be used to improve the safety and/or activity of existing drugs, develop new agents to treat certain liver-related diseases, and treat diseases caused by imbalances of circulating molecules that are controlled by the liver. The technology is especially applicable to metabolic and cardiovascular indications, among others. Currently 3 programs are utilizing the LTP Technology or related platform(s).

SUREtechnology Platform (owned by Selexis)

We acquired economic rights to over 30 SUREtechnology Platform programs from Selexis in two separate transactions in 2013 and 2015, granting us rights to downstream economics on novel biologics and biosimilars programs. The SUREtechnology Platform, developed and owned by Selexis, is a novel technology that improves the way that cells are utilized in the development and manufacturing of recombinant proteins and drugs. The technology is based on novel DNA-based elements that control the dynamic organization of chromatin within mammalian cells and allow for higher and more stable expression of recombinant proteins. The technology creates advantages over traditional approaches including accelerated development and manufacturing times, high yields and increased compound stability.

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Partners and Licensees

We currently have partnerships and license agreements with over 110 pharmaceutical and biotechnology companies. In addition to the table below, we also have more than 10 undisclosed partners and licensees.

Big Pharma

Ticker

Generics

Ticker

Biotech, continued

Ticker

AbbVie

ABBV

Alvogen

Private

Immunovant

Private

AstraZeneca

AZN

Avion

Private

J-Pharma

Private

Baxter

BAX

BioCad

Private

Marinus

MRNS

Boehringer Ingelheim

Private

Coherus

CHRS

MEI

MEIP

BMS

BMY

Gedeon Richter

GEDSF

Melinta

MLNT

Daiichi Sankyo

DSKY

Zydus Cadila

CADILAHC

Menarini

Private

Eli Lilly

LLY

Meridian Labs

Private

Eisai

4523

Metavant

Private

GSK

GSK

Biotech

Ticker

Merrimack

MACK

Janssen

JNJ

ABBA

Private

Novogen

NVGN

Merck

MRK

AiCuris

Private

Nucorion

Private

Merck KGaA

MRK

Aldeyra

ALDX

Opthea

OPT

Novartis

NVS

Amgen

AMGN

Outlook

OTLK

Ono

4528

Arcus

RCUS

Palvella

Private

Otsuka

4768

ARMO

Private

Phoenix Tissue

Private

Pfizer

PFE

Asahi Kasei

3407

Precision Biologics

Private

Sanofi

SNY

Azure

Private

Retrophin

RTRX

Takeda

4502

bluebird bio

BLUE

Revision Therapeutics

Private

Cantex

Private

SAGE

SAGE

Celgene

CELG

Seattle Genetics

SGEN

Specialty Pharma

Ticker

Corvus

CRVS

Seelos

SEEL

Achaogen

AKAO

C-Stone

2616.HK

Servier

Private

Aytu Bioscience

AYTU

CURx

Private

Sunshine Lake

Private

Aziyo

Private

Aptevo

APVO

Symphogen

Private

Beloteca

Private

Exelixis

EXEL

Teneobio

Private

CorMatrix

Private

Five Prime

FRPX

TG Therapeutics

TGTX

CTI Biopharma

CTIC

F-Star

Private

Tizona

Private

Cuda

Private

Genmab

GEN

Vaxxas

Private

Ferring

Private

Genagon

Private

Vega

Private

Gloria

2437

Genekey Biotech

Private

VentiRx

Private

Lundbeck

LUN

Glenmark

GLENMARK

Verona

VRNA

Sedor

Private

Gilead Sciences

GILD

Vertex

VRTX

Sermonix

Private

HanAll

9420

Viking

VKTX

Shire

SHPG

Harbour

Private

Xi'an Xintong

Private

Spectrum

SPPI

iMetabolic

Private

XTL Bio

XTLB

Teijin

TINLF

WuXi

Private

Vireo Health

Private

Upsher-Smith

Private

6

Portfolio

We have a large portfolio of current and future potential revenue-generating programs, including over 200 fully-funded by our partners. In addition to the table below, we also have more than 60 undisclosed programs.

Approved

Blood Disorders

Cardiovascular

CNS

Novartis

Promacta

Baxter

Nexterone

Lundbeck

Carnexiv

Exelixis/Daiichi-Sankyo

Minnebro

Menarini

Frovatriptan

Cancer

Medical Device/Cardiology

Amgen

Kyprolis

Zydus Cadila

Vivitra

Aziyo Base Business

Aziyo

Spectrum

Evomela

Zydus Cadila

Bryxta

Infectious Disease

Inflammatory/Metabolic

Alvogen

Voriconazole

Aytu

Tuzistra

Biocad

Interferon beta-1a

Melinta

Baxdela

Pfizer

Viviant/Conbriza

Hikma

Voriconazole

Par Pharmaceuticals

Posaconazole

Pfizer

Duavee

Merck

Noxafil-IV

Pfizer

Vfend-IV

Zydus Cadila

Exemptia

Phase 3 or Regulatory Submission Stage

Blood Disorders

Severe and Rare

Inflammatory/Metabolic

Biocad

BCD-066

Retrophin

Sparsentan

Coherus

CHS-0214

Bioverativ

Sutimlimab

Cancer

CNS

Oncobiologics

ONS-3010

Takeda

Pevonedistat

SAGE

Brexanolone

Oncobiologics

ONS-1045

Sedor

CE-Fosphenytoin

Sunshine Lake

Vilazodone

Other / Undisclosed

Aldeyra Therapeutics

Reproxalap

Phase 2

Blood Disorders

Infectious Disease

CNS

Novartis

KLM465

Gilead

GS-5734

CurX

IV Topiramate

Xi'an Xintong

Pradefovir

Marinus Pharma

Ganaxalone IV

Seelos

Aplindore

Cancer

C-Stone

CS1001

Eli Lilly

Merestinib

J-Pharma

JPH-203

Cantex

CX-01

Eli Lilly

Prexasertib

Precision Biologics

NPC-1C

CTI Biopharma

Tosedostat

Gloria

GLS010

VentiRx Pharma

VTX-2337

Sermonix

Lasofoxifene

Cardiovascular

Other / Undisclosed

Severe and Rare

Cardioxyl / BMS

BMS986231

Opthea Ltd

OPT-302

Palvella

PTX-022

XTL Bio

hCDR1

Inflammatory and Metabolic

Azure

Lasofoxifene

Verona

Ensifentrine

Metavant

RT-1502

Viking

VK5211

Novartis

ECF843

Viking

VK2809/VK0214

Sedor

CE-Budesonide

Viking

VK0612

7

Phase 1

Cancer

Amgen

AMG-330

IBC Generium

Deplera

Servier

S55746/S64315

Aptevo

APVO436

Janssen

JNJ64007957

Symphogen

SYM022

Arcus

AB122

MEI Pharma

ME-344

Symphogen

SYM023

Corvus

CPI-444

Meridian

ML-061

Upsher-Smith

CXCR4

F-Star

FS-102

Novartis

MIK-665

VentiRx Pharma

VTX-1463

Gedeon Richter

Bevacizumab

Novartis

BCL-201

Xi'an Xintong

MB07133

Infectious Disease

Severe and Rare

Other / Undisclosed

Vaxxas

Nanopatch

IBC Generium

GNR-008

Phoenix Tissue

PTR-01

Takeda

TAK-925

Inflammatory and Metabolic

Gedeon Richter

RGB-03

HanAll/Harbour

HL161

Genekey Biotech

PCSK-9

Immunovant

RVT-1401

Takeda

TAK-020

Pre-Clinical

Other / Undisclosed

ABBA

OmniAb

Electra

OmniAb

Ono Pharmaceuticals

OmniAb

AbbVie

OmniAb

F-Star

OmniAb

Pfizer

OmniAb

Achaogen

OmniAb

Ferring

OmniAb

Revision Therapeutics

CvZ001

Amgen

OmniAb

Fred Hutchinson

OmniAb

Seattle Genetics

OmniAb

ARMO Biosciences

OmniAb

Genmab

OmniAb

Symphogen

OmniAb

Avion

CE programs

Gilead

CE-program

Teneobio

OmniAb

Beloteca

CE-Ziprasidone

Glenmark

OmniAb

Teva

OmniAb

Boehringer Ingelheim

OmniAb

HanAll

OmniAb

Tizona

OmniAb

Celgene

OmniAb

iMetabolic

OmniAb

Vega

OmniAb

Celgene

Vipadenant

Janssen

OmniAb

VenBio

OmniAb

Covagen

OmniAb

KSQ Therapeutics

OmniAb

Wuxi

OmniAb

Five Prime

OmniAb

Merck KGaA

OmniAb

Inflammatory and Metabolic

Sedor

CE-Meloxicam

Seelos

SLS-010

Vireo Health

CE-Cannabinoids

Seelos

SLS-008

Viking

DGAT-1 Inhibitor

Infectious Disease

CNS

Nucorion

NUC-101

Cuda

Cudafol

SAGE

SAGE-689

Nucorion

NUC-202

CURx Pharma

IV Lamotrigine

Seelos

SLS-012

Cancer

Blood Disorders

Medical Device/Cardiology

Nucorion

NUC-404

Viking

EPOR Agonist

CorMatrix

CorMatrix Pipeline

Oncobiologics

Rituximab

Oncobiologics

ONS-1050

TG Therapeutics

IRAK4

8

Selected Commercial Programs

We have multiple programs under license with other companies that have products that are already being commercialized. The following programs represent components of our current portfolio of revenue-generating assets and potential for near-term growth in royalty and other revenue. For information about the royalties owed to us for these programs, see “Royalties” later in this business section.

Promacta (Novartis)

We are party to a license agreement with Novartis related to Promacta, which is an oral medicine that increases the number of platelets in the blood. Platelets are one of the three components of blood and facilitate clotting in the blood. Individuals with low platelets can be at significant risk of bleeding or death. Because of the importance of having a sufficient number of platelets, Promacta has broad potential applicability to a number of medical situations where low platelets exist.

Promacta is currently approved for four indications: (1) the treatment of thrombocytopenia in adult and pediatric patients 1 year and older with ITP who have had an insufficient response to corticosteroids, immunoglobulins or splenectomy; (2) thrombocytopenia in patients with chronic hepatitis C to allow the initiation and maintenance of interferon-based therapy; (3) in combination with standard immunosuppressive therapy for the first-line treatment of adult and pediatric patients 2 years and older with SAA; and (4) patients with SAA who have had an insufficient response to immunosuppressive therapy. Promacta was initially approved in 2008, and the product has been generating royalty revenue for Ligand since 2009. Promacta is known as Revolade in the EU and other non-US markets.

Novartis has been and continues to pursue globalization of the brand and currently markets Promacta in multiple countries for the approved indications. Specifically, Promacta is currently approved for ITP in more than 100 countries, for the Hepatitis C-related indication in more than 50 countries, and for post-immunosuppressive therapy SAA indication in more than 45 counties. Approval of Promacta in the U.S. for the first-line treatment of SAA was obtained in November of 2018.

Beyond the currently-approved indications, Novartis has also disclosed that is performing or supporting development activities to expand the brand into new indications, including as a counter measure for the hematopoietic effects of acute radiation syndrome (H-ARS), and has been granted FDA Breakthrough Therapy designation. As of January 2019, there are 46 open clinical trials related to Promacta (listed as recruiting or open, and not yet recruiting) on the clinicaltrials.gov website.

Promacta (Novartis)

< $100 million

4.7%

$100 to $200 million

6.6%

$200 to $400 million

7.5%

$400 million to $1.5 billion

9.4%

>$1.5 billion

9.3%

We are entitled to receive royalties related to Promacta during the life of the relevant patents or following patent expiry, at a reduced rate for ten years from the first commercial sale, whichever is longer, on a country-by-country basis. Novartis has listed a patent in the FDA’s Orange Book for Promacta with an expiration date in 2028, and absent early termination for bankruptcy or material breach, the term of the agreement expires upon expiration of the obligation to pay royalties. There are no remaining milestones to be paid under the agreement.

9

Kyprolis (Amgen)

Ligand supplies Captisol to Amgen for use with Kyprolis, and granted Amgen an exclusive product-specific license under our patent rights with respect to Captisol. Kyprolis is formulated with Ligand’s Captisol technology and is approved in the United States for the following:

•In combination with dexamethasone or combination with lenalidomide plus dexamethasone for the treatment of patients with relapsed or refractory multiple myeloma who have received one to three lines of therapy.

•As a single agent for the treatment of patients with relapsed or refractory multiple myeloma who have received one or more lines of therapy.

Kyprolis is also approved in multiple countries outside the U.S. and Amgen continues to invest significantly in Kyprolis to further expand its label and geography. Amgen’s obligation to pay royalties does not expire until four years after the expiration of the last-to-expire patent covering Captisol. Our patents and applications relating to the Captisol component of Kyprolis are not expected to expire until 2033.

Kyprolis (Amgen)

< $250 million

1.5%

$250 to $500 million

2.0%

$500 to $750 million

2.5%

>$750 million

3.0%

Our agreement with Amgen may be terminated by either party in the event of material breach or bankruptcy, or unilaterally by Amgen with prior written notice, subject to certain surviving obligations. Absent early termination, the agreement will terminate upon expiration of the obligation to pay royalties. Under this agreement, we are entitled to receive remaining milestones of up to $1 million, revenue from clinical and commercial Captisol material sales and royalties on annual net sales of Kyprolis.

Evomela (Spectrum and CASI)

Ligand supplies Captisol to Spectrum for use with Evomela, which is a Captisol-enabled melphalan IV formulation. The FDA approved Evomela for use in two indications:

•For the palliative treatment of patients with multiple myeloma for whom oral therapy is not appropriate.

Evomela has been granted Orphan Designation by the FDA for use as a high-dose conditioning regimen for patients with multiple myeloma undergoing ASCT. The Evomela formulation avoids the use of propylene glycol, which has been reported to cause renal and cardiac side-effects that limit the ability to deliver higher quantities of therapeutic compounds. The use of the Captisol technology to reformulate melphalan is anticipated to allow for longer administration durations and slower infusion rates, potentially enabling clinicians to safely achieve a higher dose intensity of pre-transplant chemotherapy.

Under the terms of the license agreement, we granted an exclusive license to Spectrum under our patent rights to Captisol relating to the product. We are eligible to receive over $50 million in potential milestone payments under this agreement and royalties on global net sales of the Captisol-enabled melphalan product. Spectrum’s obligation to pay royalties will expire at the end of the life of the relevant patents or when a competing product is launched, whichever is earlier, but in no event within ten years of the commercial launch. Our patents and applications relating to the Captisol component of melphalan are not expected to expire until 2033. Absent early termination, the agreement will terminate upon expiration of the obligation to pay royalties. The agreement may be terminated by either party for an uncured material breach or unilaterally by Spectrum by prior written notice.

Spectrum sub-licensed Evomela rights for Greater China to CASI in 2014. In December 2018, CASI announced China marketing approval of Evomela and a plan to launch the drug in China in 2019.

On January 17, 2019, Spectrum announced that they entered into a definitive agreement to sell its portfolio of seven FDA-approved hematology/oncology products including Evomela to Arotech Biopharma L.L.C..

Baxdela IV (Melinta)

Melinta’s Baxdela IV is a Captisol-enabled delafloxacin-IV that was approved by the FDA in June 2017 for the treatment of acute bacterial skin and skin structure infections. Delafloxacin is a novel hospital-focused fluoroquinolone antibiotic with activity against a variety of disease-causing bacteria-gram-positives, gram-negatives, atypicals and anaerobes, including quinolone-resistant MRSA. Under the terms of the agreement, we may be entitled to regulatory milestones, as well as a royalty on potential future sales by Melinta, and revenue from Captisol material sales.

10

Nexterone (Baxter)

We have a license agreement with Baxter, related to Baxter's Nexterone, a Captisol-enabled formulation of amiodarone, which is marketed in the United States and Canada. We supply Captisol to Baxter for use in accordance with the terms of the license agreement under a separate supply agreement. Under the terms of the license agreement we will continue to earn milestone payments, royalties, and revenue from Captisol material sales. We are entitled to earn royalties on sales of Nexterone through early 2033.

Noxafil-IV (Merck)

We have a supply agreement with Merck related to Merck’s NOXAFIL-IV, a Captisol-enabled formulation of posaconazole for IV use. NOXAFIL-IV is marketed in the United States, EU and Canada. We receive our commercial compensation for this program through the sale of Captisol, and we do not receive a royalty on this program.

Pfizer is marketing bazedoxifene under the brand names Viviantand Conbriza in various territories for the treatment of postmenopausal osteoporosis. Pfizer is responsible for the marketing of bazedoxifene, a synthetic drug specifically designed to reduce the risk of osteoporotic fractures while also protecting uterine tissue. Pfizer has combined bazedoxifene with the active ingredient in Premarin to create a combination therapy for the treatment of post-menopausal symptoms in women. Pfizer is marketing the combination treatment under the brand names Duavee and Duavive in various territories. Net royalties on annual net sales of Viviant/Conbriza and Duavee/Duavive are each payable to us through the life of the relevant patents or ten years from the first commercial sale, whichever is longer, on a country by country basis.

Aziyo Portfolio (Aziyo)

We receive a share of revenue from the currently marketed Aziyo portfolio of commercial pericardial repair and CanGaroo® Envelope ECM products. In addition, Ligand has the potential to receive a share of revenue and potential milestones from the currently marketed CanGaroo® ECM Envelope for cardiac implantable electronic devices. Aziyo’s products are medical devices that are designed to permit the development and regrowth of human tissue.

Exemptia, Vivitra and Bryxta (Zydus Cadila)

Zydus Cadila’s Exemptia (adalimumab biosimilar) is marketed in India for autoimmune diseases. Zydus Cadila uses the Selexis technology platform for Exemptia. We are entitled to earn royalties on sales by Zydus Cadila for ten years following the first commercial sale.

Zydus Cadila’s Vivitra (trastuzumab biosimilar) is marketed in India for breast cancer. Zydus Cadila uses the Selexis technology platform for Vivitra. We are entitled to earn royalties on sales by Zydus Cadila for ten years following the first commercial sale.

Zydus Cadila’s Bryxta (bevacizumab biosimilar) is marketed in India for non-small cell lung cancer. Zydus Cadila uses the Selexis technology platform for Bryxta. We are entitled to earn royalties on sales by Zydus Cadila for ten years following the first commercial sale.

Minnebro (Exelixis)

Daiichi Sankyo announced on January 8, 2019 the receipt of marketing approval in Japan for MINNEBROTablets (esaxerenone) for the treatment of hypertension. Our partner, Exelixis, entered into a collaboration agreement with Daiichi Sankyo for the development of esaxerenone, a mineralocorticoid receptor antagonist. Under the terms of the agreement with Exelixis, we are entitled to receive a royalty on future sales.

Summary of Selected Development Stage Programs

We have multiple fully-funded partnered programs that are either in or nearing the regulatory approval process, or given the area of research or value of the license terms we consider particularly noteworthy. We are eligible to receive milestone payments and royalties on these programs. This list does not include all of our partnered programs. For information about the royalties owed to Ligand for these programs, see “Royalties” later in this business section. In the case of Captisol-related programs, we are also eligible to receive revenue for the sale of Captisol material supply.

11

Zulresso-SAGE-547 (SAGE)

Our partner, SAGE, is developing novel medicines to treat life altering central nervous system disorders. SAGE filed an NDA with the FDA in 2018, seeking approval to market and sell Zulresso for the treatment of postpartum depression, or PPD. The NDA is currently under FDA review with a PDUFA date of March 19, 2019. We have the potential to receive milestone payments, royalties and revenue from Captisol material sales for Captisol-enabled programs. SAGE is responsible for all development costs related to the program.

Sparsentan (Retrophin)

Our partner, Retrophin, is developing sparsentan for orphan indications of severe kidney diseases, and has initiated a global pivotal Phase 3 clinical trial to enable an NDA filing for sparsentan for the treatment of FSGS. Additionally, Retrophin initiated a global pivotal Phase 3 clinical trial evaluating the long-term nephroprotective potential of sparsentan for the treatment of IgA nephropathy, a rare, immune complex mediated chronic glomerular disease. Certain patient groups with severely compromised renal function, including those with FSGS and IgA nephropathy, exhibit extreme proteinuria resulting in progression to dialysis and a high mortality rate. Sparsentan, with its unique dual blockade of angiotensin and endothelin receptors, is expected to provide meaningful clinical benefits in mitigating proteinuria in indications where there are no approved therapies.

Under our license agreement with Retrophin, we are entitled to receive potential net milestones of over $70 million and net royalties on future worldwide sales by Retrophin. The royalty term is expected to be 10 years following the first commercial sale. Retrophin is responsible for all development costs related to the program.

Prexasertib- LY2606368 (Eli Lilly)

Our partner, Eli Lilly is conducting Phase 2 clinical trials for prexasertib (Captisol-enabled LY2606368), a checkpoint kinase 1/2, or Chk 1/2, inhibitor for the treatment of solid tumors. Under the terms of the agreement, we may be entitled to regulatory milestones, royalties on potential future sales by Eli Lilly and revenue from Captisol material sales.

BMS-986231 (formerly CXL-1427) (BMS)

Our partner, BMS, is conducting Phase 2 clinical trials for a Captisol-enabled second-generation prodrug that chemically breaks down to produce HNO and an inactive byproduct. HNO is thought to have a dual mode of action, by improving cardiac function and acting as a vasodilator for treating ADHF. Under the terms of the agreement, we may be entitled to development and regulatory milestones, and royalties on potential future sales by BMS and revenue from Captisol material sales.

RVT-1502 (formerly LGD-6972) (Metavant)

Our partner, Metavant, an affiliate of Roivant, is developing RVT-1502, a GRA, which we licensed to Roivant in March 2018. In September 2017, we announced positive results from a Phase 2 clinical study evaluating the efficacy and safety of the compound (formerly known as LGD-6972), as an adjunct to diet and exercise, in subjects with type 2 diabetes mellitis inadequately controlled on metformin monotherapy. Roivant formed Metavant to pursue the development of RVT-1502 and other treatments for cardiometabolic diseases. We are entitled to potential development and regulatory milestones and royalties on potential future sales.

RVT-1401/HL161 (Immunovant, HanAll and Harbour)

Our partner, HanAll has granted Immunovant an exclusive license for the development, manufacture and marketing of RVT-1401 (HL161, an anti-FcRn antibody) for the treatment of pathogenic IgG-mediated autoimmune diseases in the U.S., Canada, Mexico, the EU, the United Kingdom, Switzerland, Latin America, the Middle East and North Africa. Immunovant is currently conducting a Phase 1 clinical trial in healthy volunteers with plans to initiate Phase 2 studies in early 2019 in myasthenia gravis and other inflammatory diseases. Additionally, HanAll and Harbour BioMed, are collaborating to develop HL161 for similar treatment in China and Korea. HanAll retains the rights to HL161 in Korea and Harbour will control the marketing in China. As part of our agreement with HanAll, we are entitled to development and regulatory milestones and royalties on potential future sales from HanAll and sublicense revenues from Immunovant and Harbour based on amounts received by HanAll.

12

TR-Beta - VK2809 and VK0214 (Viking)

Viking is developing VK2809, a novel selective TR-Beta agonist with potential in multiple indications, including hypercholesterolemia, dyslipidemia and NASH. Viking announced positive results from its Phase 2 trial for VK2809 in hypercholesterolemia and fatty liver disease. Viking has also been granted orphan drug status by the FDA for the development of VK0214 for treatment of X-ALD. Under the terms of the agreement with Viking, we may be entitled to up to $375 million of development, regulatory and commercial milestones and tiered royalties on potential future sales. Our TR Beta programs partnered with Viking are subject to CVR sharing and a portion of the cash received will be paid out to CVR holders.

TR-Beta - VK2809 and VK0214 (Viking)

< $500 million

3.5%

$500 to $750 million

5.5%

>$750 million

7.5%

SARM - VK5211 (Viking)

Our partner, Viking, is developing VK5211, a novel, potentially best-in-class SARM for patients recovering from hip-fracture. SARMs retain the beneficial properties of androgens without undesired side-effects of steroids or other less selective androgens. Viking announced positive results from its Phase 2 trial in patients who suffered hip fracture in the fourth quarter of 2017. Under the terms of the agreement with Viking, we may be entitled to up to $270 million of development, regulatory and commercial milestones as well as tiered royalties on potential future sales.

SARM - VK5211 (Viking)

< $500 million

7.25%

$500 to $750 million

8.25%

>$750 million

9.25%

Lasofoxifene (Sermonix and Azure)

Lasofoxifene is a selective estrogen receptor modulator for osteoporosis treatment and other diseases, discovered through the research collaboration between us and Pfizer. Under the terms of the license agreement with Azure, we retained the rights to the oral formulation of lasofoxifene originally developed by Pfizer.

Our partner, Sermonix has a license for the development of oral lasofoxifene for the United States and additional territories. Under the terms of the agreement, we are entitled to receive over $45 million in potential regulatory and commercial milestone payments as well as royalties on future net sales.

Our partner Azure is developing a novel formulation of lasofoxifene targeting an underserved market in women’s health. Under the terms of our agreement with Azure, we are entitled to receive up to $2.6 million in potential development and regulatory milestones as well as royalties on future net sales through the later of the life of the relevant patents (currently expected to be at least until 2027) or 10 years after regulatory approval. Azure may terminate the license agreement at any time upon six months’ prior notice.

Merestinib- LY2801653 (Eli Lilly)

Our partner, Eli Lilly is conducting Phase 2 clinical trials for Captisol-enabled merestinib (formerly known as LY2801653), a c-Met inhibitor for treatment of cancer. Under the terms of the agreement, we may be entitled to regulatory milestones, royalties on potential future sales by Eli Lilly and revenue from Captisol material sales.

Pevonedistat - TAK-924 (Millennium/Takeda)

Our partner, Millennium/Takeda is currently conducting Phase 3 trials for the development of pevonedistat for the treatment of hematological malignancies and solid tumors. Pevonedistat is a Captisol-enabled Nedd8-Activating Enzyme Inhibitor. Under the terms of the clinical-stage agreement, we may be entitled to development milestones from Millennium/Takeda and revenue from Captisol material sales.

JNJ64007957 (Janssen)

Our partner, Janssen, is developing JNJ64007957, a BCMAxCD3 bispecific antibody discovered in part with the OmniAb platform technology. Janssen is currently conducting a Phase I trial for cancer therapy. We are entitled to earn milestones based on the development of JNJ64007957.

13

AMG-330 (Amgen)

Our licensee, Amgen, is developing AMG 330, a bispecific T-cell engager (BiTE) antibody targeting CD33 and CD3, for use in humans for a wide variety of therapeutic indications. Under the terms of the agreement, we are entitled to milestones and royalties on future sales of AMG 330 formulated with Captisol.

Ganaxalone IV (Marinus)

Our partner, Marinus, is conducting Phase 2 clinical trials with Captisol-enabled ganaxolone IV in patients with PPD and refractory status epilepticus. Marinus has exclusive worldwide rights to Captisol-enabled ganaxolone, a GABAA receptor modulator, for use in humans. We are entitled to development and regulatory milestones, royalties on potential future sales and revenue from Captisol material sales.

APVO436 (Aptevo)

Our partner, Aptevo, is currently conducting a Phase 1 trial of APVO436 for the treatment of acute myeloid leukemia. There is a high unmet medical need for targeted immunotherapies such as APVO436, that can potentially treat patients with relapsed or refractory disease, or patients who cannot tolerate traditional chemotherapy. Under the terms of the agreement with Aptevo, we are entitled to milestones and royalties on future sales.

WuXi Partnership

Pursuant to the WuXi Agreement, we have granted WuXi a non-exclusive license to use our OmniRat, OmniMouse and OmniFlic platforms solely to research, develop and make antibodies, and we have agreed to use commercially reasonable efforts to deliver to WuXi animals from such platforms on a purchase order basis to support WuXi’s licensing rights under the WuXi Agreement. Further, WuXi has the right to out-license antibodies it discovers (whether for itself or at the direction of out-licensees) under the WuXi Agreement to out-licensees worldwide. We are entitled to royalties in the low single digits on net sales of products. Unless earlier terminated, the term of the WuXi Agreement shall continue indefinitely. Either party may terminate the WuXi Agreement upon specified notice of the other party's uncured material breach of the WuXi Agreement. In addition, we have the right to terminate the WuXi Agreement if WuXi or one of its out-licensees challenges the validity of one of our patents covering the platform and WuXi has the right to terminate the WuXi Agreement for convenience following a specified period after notice of termination.

In addition to other earlier stage programs, the following programs have been licensed pursuant to the WuXi Agreement:

AB122/GLS010 (Arcus and Gloria)

Our partner, WuXi, has outlicensed the rights to certain programs using the OmniAb technology to Arcus and Gloria. Arcus, is currently conducting a Phase 1 trial to evaluate the safety and tolerability of AB122 in subjects with advanced solid tumors. Additionally, Gloria, is conducting a Phase 2 trial in China to evaluate the efficacy and safety of GLS-010 injection in the treatment of recurrent or refractory classical Hodgkin’s lymphoma. Under the terms of our agreement with WuXi, we are entitled to royalties on potential future sales.

CS1001 (C-Stone)

Our partner, WuXi, has outlicensed the rights to certain programs using the OmniAb technology to C-Stone. C-Stone, is currently conducting a Phase 2 trial to evaluate the efficacy and safety of CS1001 to treat patients with natural killer cell/T-cell lymphoma and classical Hodgkin’s lymphoma. Under the terms of our agreement with WuXi, we are entitled to royalties on potential future sales.

CPI-444 (Corvus)

Our partner, Corvus, is currently conducting a Phase 1b/2 clinical trial in patients with renal cell carcinoma to evaluate CPI-444, an antagonist of adenosine A2A, in combination with the immunotherapy drug atezolizumab. CPI-444 is also being evaluated in a Phase 1b/2 trial in combination with atezolizumab in patients with non-small cell lung cancer who have failed no more than two prior regimens. Under the terms of our agreement with Corvus, we are entitled to development and regulatory milestones and tiered royalties on potential future sales. The aggregate potential milestone payments from Corvus are approximately $220 million for all indications.

14

Ensifentrine – RPL554 (Verona)

Our partner, Verona, is currently conducting a comprehensive Phase 2 clinical trial for the development of ensifentrine as a maintenance treatment of COPD with nebulized and inhaled formulations. Verona has also completed a positive Phase 2a study evaluating ensifentrine as a treatment for cystic fibrosis. Under the terms of our agreement with Verona, we are entitled to development and regulatory milestones, including a £5.0 million payment upon the first approval of any regulatory authority, and royalties on potential future sales.

ECF843 (Novartis)

Novartis is developing ECF843 for the treatment of dry-eye and other ophthalmic indications. ECF843 has been tested in a Phase 2 trial demonstrating the primary endpoint was met. Novartis uses the Selexis technology platform for ECF843. Under the terms of our agreement with Novartis, we are entitled to development and regulatory milestones and royalties on potential future sales.

Royalties

We have multiple programs under license with other companies that have products that are already being commercialized. In addition to the table below, we have generally described a typical Captisol and OmniAb royalty arrangement as low- to mid-single digit royalties. The following table represents substantially all of the disclosed information about our royalty arrangements:

Royalty Table

Ligand Licenses With Tiered Royalties*

Program

Licensee

Royalty Rate

Duavee

Pfizer

0.5% - 2.5%

Viviant/Conbriza

Pfizer

0.5% - 2.5%

CE-Lamotrigine

CURx

4.0% - 7.0%

CE-Topiramate

CURx

6.0% - 7.5%

CE-Budesonide

Sedor

8.0% - 10.0%

CE-Meloxicam

Sedor

8.0% - 10.0%

IRAK4

TG Therapeutics

6.0% - 9.5%

Lasofoxifene

Sermonix

6.0% - 10.0%

FBPase Inhibitor (VK0612)

Viking

7.5% - 9.5%

SARM (VK5211)

Viking

7.25% - 9.25%

TR Beta (VK2809 and VK0214)

Viking

3.5% - 7.5%

Oral EPO

Viking

4.5% - 8.5%

DGAT-1

Viking

3.0% - 7.0%

Various

Nucorion

4.0% - 9.0%

Various

Seelos

4.0% - 10.0%

OmniAb-iMetabolic

iMetabolic

<6%

OmniAb-Genagon

Genagon

4.0% - 6.0%

Mineral Coated Microparticle technology

Dianomi

2.0% - 3.0%

PTX-022

Palvella

5.0% - 9.8%

RVT-1502

Metavant

Low double digit to mid-teen royalty

CPI-444

Corvus

Mid single digit to low-teen royalty

Ensifentrine (RPL554)

Verona

Low to mid-single digit royalty

15

Ligand Licenses With Fixed Royalties*

Program

Licensee

Royalty Rate

Evomela

Spectrum Pharma

20%

Baxdela

Melinta

2.5%

Brexalalone (SAGE-547)

SAGE

3%

Sparsentan

Retrophin

9%

CE-Fosphenytoin

Sedor

11%

Pradefovir

Xi'an Xintong

9%

MB07133

Xi'an Xintong

6%

KLM465

Novartis

14.5% (6.5% in year one)

Topical lasofoxifene

Azure Biotech

5%

MM-121

Merrimack Pharma

<1.0%

MM-141

Merrimack Pharma

<1.0%

ME-143

MEI Pharma

Low single digit royalty

ME-344

MEI Pharma

Low single digit royalty

Reproxalap

Aldeyra Therapeutics

Low single digit royalty

PCSK-9

Genekey

Low single digit royalty

CS1001

C-Stone

Low single digit royalty

Various

Gloria

Low single digit royalty

4-1BB

Zhilkang Hongyi

Low single digit royalty

AB122

Arcus

Low single digit royalty

OmniAb-KSQ Therapeutics

KSQ Therapeutics

Single digit royalty

*Royalty rates are shown net of sublicense payments. Royalty tier references for specific rates notated in the table are for up to and including the dollar amount referenced. Higher tiers are only applicable for the dollar ranges specified in the table.

Contract Payments (Milestones)

Many of our programs under license with our partners will generate contract payments to us if our partners reach certain development, regulatory and commercial milestones. The following table represents the potential maximum value of our contract payment pipeline on milestones by development stage, technology and partner (in thousands):

We have a number of internal development programs focused on a wide-range of indications. Our primary research and development efforts are led by our teams in Emeryville, California and Cambridge, England. The following table represents internal programs eligible for further development or partnership:

16

Program

Development Stage

Indication

Luminespib/Hsp90 Inhibitor

Phase 2

Oncology

FAAH Inhibitor

Phase 1

Pain

CE-Sertraline, Oral Concentrate

Phase 1

Depression

CE-Iohexol

Phase 1

Diagnostics

CCR1 Antagonist

Preclinical

Oncology

CE-Busulfan

Preclinical

Oncology

CE-Cetirizine Injection

Preclinical

Allergy

CE-Silymarin for Topical formulation

Preclinical

Sun damage

FLT3 Kinase Inhibitors

Preclinical

Oncology

GCSF Receptor Agonist

Preclinical

Blood disorders

Liver Specific Glucokinase Activator

Preclinical

Diabetes

Omnichicken derived antibodies (5 programs)

Discovery

Multiple

Chk1 Inhibitor

Preclinical

Oncology

Manufacturing

We contract with a third party manufacturer, Hovione, for Captisol production. Hovione is a global supplier with over 50 years of experience in the development and manufacture of APIs and Drug Product Intermediates. Hovione operates FDA-inspected sites in the United States, Macau, Ireland and Portugal. Manufacturing operations for Captisol are currently performed at two sites, in both of Hovione's Portugal and Ireland facilities with distribution operations also performed from Hovione's Portugal and Ireland sites. Additionally, we also store and distribute Captisol from a subterranean warehouse controlled by us and located in Kansas. We believe we maintain adequate inventory of Captisol to meet our current and future partner needs.

In the event of a Captisol supply interruption, we are permitted to designate and, with Hovione’s assistance, qualify one or more alternate suppliers. If the supply interruption continues beyond a designated period, we may terminate the agreement. In addition, if Hovione cannot supply our requirements of Captisol due to an uncured force majeure event, we may also obtain Captisol from a third party and have previously identified such parties.

The current term of the agreement with Hovione is through December 2024. The agreement will automatically renew for successive two year renewal terms unless either party gives written notice of its intention to terminate the agreement no less than two years prior to the expiration of the initial term or renewal term. In addition, either party may terminate the agreement for the uncured material breach or bankruptcy of the other party or an extended force majeure event. We may terminate the agreement for extended supply interruption, regulatory action related to Captisol or other specified events. We have ongoing minimum purchase commitments under the agreement.

For further discussion of these items, see below under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Competition

Some of the drugs we and our licensees and partners are developing may compete with existing therapies or other drugs in development by other companies. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competing products or technologies and may establish collaborative arrangements with our competitors.

Our Captisol business may face competition from other suppliers of similar cyclodextrin excipients or other technologies that are aimed to increase solubility or stability of APIs. Our OmniAb antibody technology faces competition from suppliers of other transgenic animal systems that are also available for antibody drug discovery.

Our competitive position also depends upon our ability to obtain patent protection or otherwise develop proprietary products or processes. For a discussion of the risks associated with competition, see below under “Item 1A. Risk Factors.”

17

Government Regulation

The research and development, manufacturing and marketing of pharmaceutical products are subject to regulation by numerous governmental authorities in the United States and other countries. We and our partners, depending on specific activities performed, are subject to these regulations. In the United States, pharmaceuticals are subject to regulation by both federal and various state authorities, including the FDA. The Federal Food, Drug and Cosmetic Act and the Public Health Service Act govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of pharmaceutical products and there are often comparable regulations that apply at the state level. There are similar regulations in other countries as well. For both currently marketed and products in development, failure to comply with applicable regulatory requirements can, among other things, result in delays, the suspension of regulatory approvals, as well as possible civil and criminal sanctions. In addition, changes in existing regulations could have a material adverse effect on us or our partners. For a discussion of the risks associated with government regulations, see below under “Item 1A. Risk Factors.”

Patents and Proprietary Rights

We believe that patents and other proprietary rights are important to our business. Our policy is to file patent applications to protect technology, inventions and improvements to our inventions that are considered important to the development of our business. We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position.

Patents are issued or pending for the following key products or product families. The scope and type of patent protection provided by each patent family is defined by the claims in the various patents. The nominal patent expiration dates have been provided. The actual patent term may vary by jurisdiction and depend on a number of factors including potential patent term adjustments, patent term extensions, and terminal disclaimers. For each product or product family, the patents and/or applications referred to are in force in at least the United States, and for most products and product families, the patents and/or applications are also in force in European jurisdictions, Japan and other jurisdictions.

Promacta

Patents covering Promacta are owned by Novartis. The United States patent listed in the FDA’s Orange Book relating to Promacta with the latest expiration date is not expected to expire until 2027. Six months of additional exclusivity to each of the U.S. expiration dates listed in the table has been granted due to pediatric studies conducted by GlaxoSmithKline plc (NYSE:GSK), thereby taking the latest expiration date into 2028. The type of patent protection (e.g., composition of matter or use) and the expiration date for each unexpired patent listed in the Orange Book are provided in the following table. In addition, certain related patents in the commercially important jurisdictions of Europe and Japan are identified in the following table.

Promacta

United States

Corresponding Foreign

Type of Protection

U.S. Patent No.

U.S. Expiration Date

Jurisdiction

Patent Number

Expiration Date‡

CoM / Use

7,160,870

11/20/2022

EU

1,864,981

5/24/2021

EU

1,889,838

5/24/2021

EU

1,294,378

3/14/2025*

Japan

3,813,875

5/24/2021

Japan

4,546,919

5/24/2021

Use

7,332,481

5/24/2021

EU

1,294,378

3/14/2025*

EU

1,864,981

5/24/2021

EU

1,889,838

5/24/2021

Japan

3,813,875

5/24/2021

Japan

4,546,919

5/24/2021

CoM / Use

7,452,874

5/24/2021

EU

1,864,981

5/24/2021

EU

1,889,838

5/24/2021

Japan

3,813,875

5/24/2021

Japan

4,546,919

5/24/2021

18

CoM / Use

7,473,686

5/24/2021

EU

1,864,981

5/24/2021

EU

1,294,378

3/14/2025*

EU

1,889,838

5/24/2021

Japan

3,813,875

5/24/2021

Japan

4,546,919

5/24/2021

CoM / Use

7,547,719

7/13/2025

EU

1,534,390

5/21/2023

Japan

4,612,414

5/21/2023

Use

7,790,704

5/24/2021

EU

1,294,378

3/14/2025*

EU

1,864,981

5/24/2021

EU

1,889,838

5/24/2021

Japan

3,813,875

5/24/2021

Japan

4,546,919

5/24/2021

Use

7,795,293

5/21/2023

EU

1,534,390

5/21/2023

Japan

4,612,414

5/21/2023

CoM / Use

8,052,993

8/1/2027

EU

2,152,237

8/1/2027⁑

Japan

5,419,866

8/1/2027

Japan

5,735,078

8/1/2027

Japan

6,144,713

8/1/2027

CoM / Use

8,052,994

8/1/2027

EU

2,152,237

8/1/2027⁑

Japan

5,419,866

8/1/2027

Japan

5,735,078

8/1/2027

Japan

6,144,713

8/1/2027

CoM / Use

8,052,995

8/1/2027

EU

2,152,237

8/1/2027⁑

Japan

5,419,866

8/1/2027

Japan

5,735,078

8/1/2027

Japan

6,144,713

8/1/2027

CoM / Use

8,062,665

8/1/2027

EU

2,152,237

8/1/2027⁑

Japan

5,419,866

8/1/2027

Japan

5,735,078

8/1/2027

Japan

6,144,713

8/1/2027

CoM / Use

8,071,129

8/1/2027

EU

2,152,237

8/1/2027⁑

Japan

5,419,866

8/1/2027

Japan

5,735,078

8/1/2027

Japan

6,144,713

8/1/2027

CoM / Use

8,828,430

8/1/2027

EU

2,152,237

8/1/2027⁑

Japan

5,419,866

8/1/2027

Japan

5,735,078

8/1/2027

Japan

6,144,713

8/1/2027

‡Expiration dates of European and Japanese patents are calculated as 20 years from the earliest nonprovisional filing date to which priority is claimed, and may not take into account extensions that are or may be available in these jurisdictions.

⁎Includes extension of term through Supplementary Protection Certificate (SPC)

⁑Revoked; on appeal

Kyprolis

Patents protecting Kyprolis include those owned by Amgen and those owned by us. The United States patent listed in the Orange Book relating to Kyprolis with the latest expiration date is not expected to expire until 2029. Patents and applications owned by Ligand relating to the Captisol component of Kyprolis are not expected to expire until 2033. Amgen has filed suit against several generic drug companies over their applications to make generic versions of Kyprolis, with a trial scheduled for May 2019. The type of patent protection (e.g., composition of matter or use) for each patent listed in the Orange Book and the expiration dates for each patent listed in the Orange Book are provided in the following table. In addition, certain related patents in the commercially important jurisdictions of Europe and Japan are identified in the following table.